Correlation Between Riskified and SimilarWeb

Can any of the company-specific risk be diversified away by investing in both Riskified and SimilarWeb at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Riskified and SimilarWeb into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Riskified and SimilarWeb, you can compare the effects of market volatilities on Riskified and SimilarWeb and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Riskified with a short position of SimilarWeb. Check out your portfolio center. Please also check ongoing floating volatility patterns of Riskified and SimilarWeb.

Diversification Opportunities for Riskified and SimilarWeb

-0.04

Correlation Coefficient

Riskified  SimilarWeb

Good diversification

The 3 months correlation between Riskified and SimilarWeb is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Riskified and SimilarWeb in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SimilarWeb and Riskified is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Riskified are associated (or correlated) with SimilarWeb. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SimilarWeb has no effect on the direction of Riskified i.e., Riskified and SimilarWeb go up and down completely randomly.

Pair Corralation between Riskified and SimilarWeb

Given the investment horizon of 90 days Riskified is expected to under-perform the SimilarWeb. But the stock apears to be less risky and, when comparing its historical volatility, Riskified is 1.54 times less risky than SimilarWeb. The stock trades about -0.01 of its potential returns per unit of risk. The SimilarWeb is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  910.00  in SimilarWeb on September 2, 2024 and sell it today you would earn a total of  331.00  from holding SimilarWeb or generate 36.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Riskified  vs.  SimilarWeb

Riskified

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Riskified has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward-looking signals, Riskified is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

SimilarWeb

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SimilarWeb are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, SimilarWeb sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Riskified and SimilarWeb

The main advantage of trading using opposite Riskified and SimilarWeb positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Riskified position performs unexpectedly, SimilarWeb can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in SimilarWeb will offset losses from the drop in SimilarWeb's long position.

The idea behind Riskified and SimilarWeb pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.